CBI arrests 3, Nirav remains untraceable
Arrested bankers suspected of steering fraudulent loans to companies linked to Modi and Choksi; Nirav retains lawyer Vijay Aggarwal
A Punjab National Bank (PNB) employee arrested in connection with the fraud of ₹11,400 crore in the bank involving diamond merchants Nirav Modi and Mehul Choksi said during questioning that the unauthorised issue of bank guarantees to the duo’s companies was a “regular” occurrence at the firm and that “many other officers” had issued such guarantees, belying claims by senior bank officials that the fraud was perpetrated by a few rogue employees.
Meanwhile, tax officials familiar with the matter said that other companies of Modi and Choksi have borrowed a significant sum of money from banks and that if the issue remains unresolved, the size of the problem could balloon to over ₹20,000 crore.
Interestingly, the officials, who asked not to be identified, say they have documents to show that Modi’s companies were either over-invoicing goods or simply trading in non-existent ones. Over-invoicing refers to fraudulently increasing the price of a product.
The Central Bureau of Investigation (CBI) on Saturday arrested former PNB deputy manager Gokulnath Shetty and single-window operator Manoj Kharat (both worked at the Brady House branch of the PNB in Mumbai; Kharat was suspended by the bank after the fraud came to light) and Hemant Bhatt, who the agency claimed is an accountant of Nirav Modi.
The whereabouts of Nirav Modi aren’t known, and the federal investigation agency is trying to get confirmation from the Interpol about his alleged presence in New York.
Top lawyer Vijay Aggarwal, who represented Shahid Balwa in the 2G case, is believed to have been retained by Modi.
While making a case for their custodial interrogation, the CBI told a Mumbai special court that Shetty was one of the officials at the branch who was using the SWIFT system (a messaging system used for inter-bank transactions) in the capacity of maker/ verifier/authoriser to enter fraudulent SWIFT messages guaranteeing the borrowings of Modi and Choksi’s companies.
“The involvement and connivance of more staff members and outsiders at this stage cannot be ruled out. But he is not cooperating with the investigation and giving evasive answers in respect of the aforesaid issues,” the CBI remand application said.
The agency cited Kharat as saying that “this (fraudulent issuance of letters of undertaking or LoUs) was happening regularly and many other officers have done this before”.
“But he was also not revealing their names, hence their custodial interrogation is necessary,” CBI said in its application. The three arrested have been remanded to police custody for 14 days till 3 March.
A CBI spokesman added that six more PNB officials are being investigated by the agency in Mumbai. Minister of state for finance Shiv Pratap Shukla said on Saturday it is working with the Prime Minister’s Office and the government will try to extradite and punish Modi.
According to PNB’s complaints to CBI, firms of Nirav Modi and Mehul Choksi were issued LoUs to avail buyer’s credit on the basis of import documents presented to the Brady House branch, but none of the transactions were routed through the Core Banking System of the bank.
JANUARY
1: Nirav Modi leaves India 6: Mehul Choksi, Modi’s uncle and head of the Gitanjali Group, leaves India
16: Nirav Modi group representatives approach PNB’s branch seeking issuance of letter of undertakings for raising buyer’s credit. New set of bank officials insist on cash margins, which the group contests
16-24: Closer scrutiny of books shows earlier letters of undertaking (LoUs, essentially guarantees) issued to the group firms made without entries in bank’s books and without supporting documentation. PNB holds a series of meetings with the firms, asking them to pay the amounts and provide necessary documentation related to the imports
25: First set of LoU liabilities related to 3 Modi group firms amounting to ~281 crore mature
29: PNB files a fraud complaint against Modi group firms with RBI. Moves to register FIR with CBI
FEBRUARY
4: CBI issues lookout notice against Nirav Modi
5: PNB informs stock exchanges about the ~281 crore fraud involving the Modi group
7: PNB files fraud complaint against the Mehul Choksi promoted Gitanjali group companies with RBI for ~65 crore LOU liability due on February 9. FIR filed against these companies with CBI
12: Total fraud of ~11,394 crore detected involving Modi group firms, Gitanjali group firms and Chandri Paper and Allied Products Pvt Ltd dating to 2011 13: Bank files fresh FIR with CBI and registers complaint with Enforcement Directorate 14: Bank informs the stock exchanges of the magnitude of the fraud
15: ED conducts raids across 17 locations; attaches properties worth ~5,100 crore
16: MEA suspends Modi and Choksi’s passport; CBI seeks Interpol help amid reports in several media outlets that the billionaire jeweller is in New York
17: The CBI arrests a former employee of PNB who is believed to be a key figure in the fraud disclosed by the country’s second-largest state-run lender earlier this week. Two other persons are also arrested, including a key employee of Modi.